Transfer prices
A)are an accounting device to allocate the costs and revenues of intermediate products across divisions
B)increase the 'profits' of the profit center producing the intermediate product when they rise
C)decrease the 'profits' of the profit center using the intermediate product when they rise
D)all of the above

Question

​Transfer prices
A)​are an accounting device to allocate the costs and revenues of intermediate products across divisions          
B)increase the 'profits' of the profit center producing the intermediate product when they rise
C)decrease the 'profits' of the profit center using the intermediate product when they rise
D)​all of the above

Quizplus · Accepted Answer

Transfer prices are an accounting tool used to allocate costs and revenues of intermediate products between different divisions or profit centers within a company. When transfer prices rise, the profit center producing the intermediate product may appear to have higher profits, but at the same time, the profit center using the intermediate product may appear to have lower profits. Therefore, all of the above options are correct.

​Transfer Prices

Transfer Prices